Tesla signs first nickel supply deal with US firm

Tesla signs first nickel supply deal with US firm

The logo of the company Tesla is seen at its branch office in Bern, Switzerland on October 28, 2020. REUTERS Arnd Wiegmann File Photo

Jan 10 Reuters -- Tesla Inc TSLA.O has signed its first U.S. nickel supply deal, choosing Talon Metals Corp.'s TLO.TO Tamarack mine project in Minnesota due to plans to make the electric vehicle battery metal in a way it considers more environmentally friendly.

Demand for nickel is expected to go up over the next decade as EVs go mainstream, as a result of the deal on Monday. Nickel bolsters energy storage in a battery's cathode, which in turn extends an EV's range.

In 2020, Tesla Chief Executive Elon Musk pleaded with the mining industry to produce more nickel in an environmentally sensitive way. Musk also derided U.S. nickel production as objectively very lame By sourcing from Talon's Minnesota project, a joint venture with Rio Tinto RIO.AX slated to open by 2026, Musk secures a key U.S. source of the metal for Tesla battery factories in Texas and Nevada, while also reducing the company's supply lines. The automaker signed nickel supply deals with BHP BHPB.L BHP.AX in Australia and New Caledonia last year.

Indonesia is the world's largest nickel producer, but miners there typically use energy-intensive technology to extract the metal and deploy controversial waste disposal practices, including dumping waste rock in waterways.

Talon Metals plans to use technology that will allow it to suck carbon dioxide out of the atmosphere and chemically bind it to rocks found inside its Tamarack project in northern Minnesota. The process is still being tested, but it would let Talon market nickel be carbon neutral, a huge appeal for Musk and Tesla.

Drew Baglino, a Tesla executive, said in a press release that responsible sourcing of battery materials has been a focus for Tesla.

Over the course of six years, Tesla plans to buy 75,000 tons of nickel concentrate, as well as smaller amounts of cobalt and iron ore, at London Metals Exchange-listed prices. It was not immediately clear where Tesla will refine the nickel concentrate. The United States does not have a nickel refinery.

Just before the news was published, Talon's shares were halted. The shares of Tesla went up 3% on Monday.

Henri van Rooyen, Talon's CEO, said that Talon is excited to support Tesla's mission to accelerate the transition to renewable energy.

In 2020, the automaker inked a deal for lithium supply with Piedmont Lithium Inc PLL.O for its Texas battery plant, but the deal was stopped last year due to rising opposition in North Carolina to Piedmont's proposed mine.